Europe in the red, the Bank of England reacts, the risk of recession reigns – 09/28/2022 at 14:29


Entrepreneurs work in London, Great Britain

by Claude Chendjou

PARIS (Reuters) – Wall Street was expected to fall and European stock markets were in the red mid-session on Wednesday, caught up in a new risk aversion linked to hopes of another the sharp increase in interest rates in the euro zone next month, the publication of economic indicators that are considered disappointing, the turmoil in the foreign exchange market and the evolution of the energy crisis.

The future of indices in New York announced an opening on Wall Street below 0.4% for the Dow Jones, 0.64% for the Standard & Poor’s 500 and 1.1% for the Nasdaq.

In Paris, the CAC 40 fell 1.28% to 5,680.07 at 11:50 GMT. In Frankfurt, the Dax lost 1.37% and in London, the FTSE fell 0.7%.

The pan-European FTSEurofirst 300 index fell by 1.33%, the EuroStoxx 50 in the euro zone by 1.43% and the Stoxx 600 by 1.46%.

Several European Central Bank (ECB) officials said on Wednesday that the Frankfurt institute may need to raise interest rates by another 75 basis points at its October meeting and decide on another increase in December. neither stimulates nor slows down the economy.

In terms of economic indicators, household confidence in France fell more strongly than expected in September according to INSEE, while Germany’s Gfk survey showed that consumer sentiment should fall further in October for the fourth consecutive month. -next month due to high inflation and rising energy costs. .

The leaks of the Nord Stream 1 and 2 gas pipelines in the Baltic Sea, which were seen as possible acts of sabotage, also highlighted risk aversion, as Europe promised a “strong and united answer” if there are intentional acts.

In the foreign exchange market, the turmoil continues as the Bank of England (BoE) announced on Wednesday that it will buy as many British government bonds as needed on October 14 to stabilize the markets.

The International Monetary Fund (IMF) and the rating agency Moody’s also openly criticized London’s new economic strategy, which caused the pound sterling to fall and the cost of public debt to rise.

VALUES IN EUROPE

In Europe, the only sector in green is health (+0.79%), a defense compartment.

It was supported in particular by Sanofi which gained 1.5%, the laboratory which declared to find a positive impact on the exchange in its results for the third quarter. Swiss group Roche, which rose 4.05%, benefited from favorable announcements from Biogen and Eisai on their experimental treatment for Alzheimer’s disease.

On the downside, sectors sensitive to economic conditions such as energy, basic resources, distribution and banks fell by 1.15%, 1.45%, 2.72% and 3.83% respectively. %.

German group Commerzbank (-6.27%) also announced new provisions linked to its Polish subsidiary mBank.

RATE

European bond yields are volatile and bearish after Bank of England announcements. That of the ten-year German Bund, which fell during the session at 2.19%, rose to 2.29%, while the two-year is seen at 1.91%, giving more than seven basis points.

The yield on ten-year US Treasury bonds also fell, about one point, to 3.95%. The two-year-old gave up nearly nine points to 4.21%.

CHANGES

The dollar, which rose 0.49%, traded at a new 20-year high against a basket of benchmark currencies, supported by its safe-haven status and expectations of rising credit costs. Wells Fargo analysts estimate that the key rate of the US Federal Reserve (Fed) should be between 4.75% and 5% before the end of the first quarter of 2023.

The euro traded at 0.9562 dollars, down 0.31%, punished by the latest developments in the gas crisis in Europe.

The pound sterling, which briefly pared its losses against the dollar after the BoE announcements, fell 1.55% to 1.057 dollars, very close to its historic low hit on Monday of 1.03 dollars.

wool

Oil prices were broadly stable, with the risk of Hurricane Ian disrupting production in the Gulf of Mexico offset by the strength of the dollar and rising crude inventories in the United States.

The barrel of Brent gained 0.08% to 86.34 dollars a barrel and the American light crude (West Texas Intermediate, WTI) 0.27% to 78.71 dollars.

(Written by Claude Chendjou, edited by Jean-Stéphane Brosse)

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